Asia Mid-Session Market Update: Oil prices spike 5% on non-OPEC production cut agreement; Property and insurance names lead China lower
Mon, 12 Dec 2016 1:31 AM EST
***Friday US markets on close: Dow +0.7%, S&P500 +0.6%, Nasdaq +0.5%***
- At the close: VIX 11.8 (-0.9pts); Treasuries: 2-yr 1.15% (+2bps), 10-yr 2.46% (+8bps), 30-yr 3.15% (+7bps)
- Best Sector in S&P500: Healthcare
- Worst Sector in S&P500: Materials
***Weekend US Corporate Headlines***
- BA: Boeing, Iran Air Announce Agreement for 80 Airplanes with estimated value of $16.6B
***Politics***
- (IT) Outgoing Foreign Min Gentiloni given a mandate to form a new Italy govt following resignation of PM Renzi - press
- (US) John Kennedy (R) wins Louisiana runoff elections for US Senate; Gives Republicans 52 seats
- (US) Reportedly Pres-elect Trump has picked Exxon CEO Tillerson as nominee for Secretary of State
- (HK) Hong Kong Financial Sec Tsang hands in resignation; hinting in a blog post that he will run for the position of Chief Executive - local media
- (NZ) New Zealand confirms Bill English as new PM, as expected
***Asia Session Notable Observations, Speakers and Press***
- WTI crude oil spikes up 5% in early electronic trade to test $54.50 after non-OPEC oil producers' meeting yielded an output cut; Saudi minister also optimistic about being able to cut production more than anticipated.
- Asian indices mixed - Nikkei225 leading advancers as JPY remains weak due to rising US treasury yields, while Shanghai Composite falls about 2%; Weakness in China attributed to China Insurance Regulatory Commission banning insurers from investing in stocks (amid allegations of short term trading) and property sector losses on China Vanke warning of significant price declines next year.
- Commodity currencies CAD and MXN benefit from higher oil prices; Safe-haven currencies JPY and CHF remain sold off, as latest CFTC data show their net short positions among speculators at 1-year high.
- Political uncertainty in Italy may recede as Foreign Min Gentiloni gathers parliament leaders in attempt to form a new govt; May meet with President again on Monday to inform about progress in talks
- Multiple press sources speculating BOJ may have to step back from its policy easing stance with either reduced asset purchase program for JGBs or higher 10-year yield target due to steadily rising Treasury rates in the US also raising rates Of JGBs.
Energy:
- 12 non-OPEC producers agree to production cuts totaling 612K bpd - press
- (SA) Saudi energy min: very optimistic about meeting with Non-OPEC producers tomorrow; expect 10 to 12 non-OPEC producers to participate in the final communique
China:
- (CN) China NDRC researchers see 2017 CPI at 1.8% and PPI at 1.0% - press
- (CN) China State Information Center calling for 2017 GDP target of ~6.5%; CPI to be capped at ~2.5% and creation of 10M jobs - CSJ
- (CN) Nomura targets 2017 GDP of 6.5% and 2018 GDP at 6.2% - press
Japan
- (JP) BOJ may soon have to consider tightening policy for the first time since 2007 due to rising US Treasury yields following election of Trump - press
- (JP) Financial press discusses the possibility of the BOJ tapering its bond buying to ¥70T v ¥80T target, due to the introduction of the yield curve control policy
- (JP) Japan's ruling LDP party proposes for Parliament's upper house to vote to casino and pension reform bills on Tuesday - Japan press
- (JP) Bank of Japan (BOJ) and Financial Services Agency (FSA) have increased oversight of bank lending for apartments due to concern such transactions could spur bad debt - press
Australia / New Zealand:
- (AU) RBC head of fixed income: RBA's policy statement may imply neutral bias, but inflation forecasts suggest remaining bias to cut; Confident will cut rates again in 2017 - Australian press
- (NZ) Moody's: New Zealand's Half-year Budget shows strong public finances and robust economic growth
- (NZ) New Zealand Institute of Economic Research (NZIR) releases Q3 report: Raises 2016/17-2018/19 GDP forecast
***Asian Equity Markets/Futures (00:30ET)***
- Nikkei225 +1.0%, S&P/ASX flat, Kospi +0.1%, Shanghai Composite -1.8%, Hang Seng -1.1%
- Equity Futures: S&P500 flat, Dax flat, FTSE100 +0.3%
***FX ranges/Commodities/Futures/Fixed Income (00:30ET):***
- EUR 1.0505-1.0660; JPY 112.85-113.85; AUD 0.7410-0.7455; NZD 0.7070-0.7140
- Feb gold -0.3% at $1,159/oz, Jan crude oil +4.8% at $53.98/brl, Mar copper +0.6% at $2.67/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 3.2 tonnes to 857.5 tonnes; 17th straight decline; lowest since May 18th
- (KR) South Korea sells 10-yr bonds at 2.271%
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.9086 V 6.8972 PRIOR; weakest Yuan setting since Nov 25th
***Key economic data:***
- (JP) JAPAN OCT MACHINERY ORDERS M/M: 4.1% V 1.1%E; Y/Y: -5.6% V -4.9%E
- (JP) JAPAN NOV PPI (CGPI) M/M: 0.4% V 0.3%E; Y/Y: -2.2% V -2.3%E
- (NZ) New Zealand Nov REINZ median home price y/y: +13.2% v +4.0% prior; Home sales y/y: -6.0% v -14.2% prior
***Asia movers***
- Iluka ILU.AU: Macquarie Raised ILU.AU to Neutral from Underperform; +5.0%
- Sirtex Medical SRX.AU: UBS maintains Buy; Lowers PT by 14% to A$33.50; +3.8%
- Hyundai Heavy 009540.KR: Awarded $700M order to build 10 ships for Iran Shipping Lines - press; +2.6%
- Domino's Pizza DMP.AU: UBS Raised DMP.AU to Buy from Neutral, price target: A$79.70; +2.0%
- Downder DOW.AU: JV, Keolis Downer, awarded ~A$450M contract in Newcastle; +1.8%
- Alpine Electronics 6816.JP: Raises FY16/17 guidance Net profit ¥2.1B from loss ¥2.5B; Affirms Op ¥2.3B; Rev ¥236.5B; +1.5%
- Qantas QAN.AU: Plans to launch direct Australia-Europe 17-hour flights with its new Dreamliner aircraft - press; Morgan Stanley negative note -3.2%
- Truly International Holdings 732.HK: Credit Suisse Cuts 732.HK to Neutral from Outperform; -4.8%
- China Vanke 2202.HK: President: China home sales may fall significantly over the next year - Chinese press; -5.4%
- Geely Auto 175.HK: Credit Suisse Cuts 175.HK to Neutral from Outperform; -6.2%
- Flight Center FLT.AU: Morgan Stanley Cuts FLT.AU to Underweight from Equal Weight; -7.7%
- China Green Holdings 904.HK: Issues H1 profit warning; -8.5%